Of Rice and Men (Part of the “Cultivating Support in Washington” Series)

July 12, 2007 | Crop subsidies are the most prominent—and expensive—component of the farm bill, and it is a point of contention among analysts whether there should be subsidies at all. But beneath that debate lies a battle over the distribution of government money among farmers, pitting Southerners against Northerners, “commodity” crops against fruits and vegetables, and big farmers against small ones. The effects of subsidies are complex, so it’s not always easy to determine the winners and losers.

The farm bill’s subsidy program is known as the commodity title and includes provisions to shield growers of certain crops from low or fluctuating market prices. It also includes “direct payments,” which are disbursed to landowners based on the type of crop historically grown on their property.

Family Farms Take on Corporate Heavyweights

Because small farmers typically own less than half the land they till, direct payments work to the advantage of landlords and large corporate farms. And because the land need not even be used for farming—it can be used for nearly anything except growing fruits and vegetables—prisons, universities, real estate moguls, famous athletes and other wealthy figures in rural areas sometimes receive large payouts simply for owning land. “I don’t think anybody would argue that there haven’t been abuses, and all of them need to be squashed the best they can,” said Daryll Ray, director of the University of Tennessee’s Agricultural Policy Analysis Center. Large, highly profitable farms receive a disproportionate share of subsidies, with some receiving millions of dollars from the government each year.

A cap on these payments, known as a payment limitation, is supposed to restrict payments to $180,000. But that limit is easily doubled or circumvented altogether through a loophole that allows individuals to set up multiple corporate entities. Those advocating for a more equitable distribution of funds among farmers press for stricter limits.

At the crux of the payment limitations debate is the role of the farm program as a whole. Is it to provide assistance to struggling family farmers, the way it did at its inception following the Great Depression, or is its goal to uniformly subsidize a product in order to lower its market price for the buyer? Groups that believe the latter, including the American Farm Bureau Federation, which spent $5.5 million on federal lobbying in 2006, argue that refusing to award subsidies after a certain cutoff point is akin to the government regulating the size of farms. Those groups tend to be Republican-leaning in their campaign contributions.

“While it is usually a bipartisan logroll, because both parties want to spend money on farmers, they tend to want to spend money on different farmers,” said Robert Paarlberg, professor of political science at Wellesley College. The Farm Bureau echoes the more Republican stance, while Democrats “favor smaller, less efficient, less competitive farmers,” Paarlberg said.

States State their Minds

The overall battle over payment limitations is drawn not along party lines, but along the Mason-Dixon line, with Southern lobbying fiercely against any legislation limiting subsidies. That’s because cotton and rice, which are grown mostly in the South, enjoy the highest rates. Government payments make up 45 percent to 60 percent of cotton farmers’ income, on average, said Dan Owens of the Center for Rural Affairs, which represents family farms. The cotton industry also donates more money to political candidates than any crop except sugar.

Agricultural goods are often represented and promoted by councils that are funded by “check-offs,” wherein a percentage of the revenue generated by each sale of the good goes to its council. Because these groups derive their income on a per-unit basis, they generally support the notion that goods should be subsidized by the unit, regardless of farm size. Associations such as the National Cotton Council “advocate more for the plants now than they do for the farmers,” said Owens.

Trade associations for the big five commodity crops—corn, soybeans, rice, wheat and cotton—are some of the most powerful lobbies on Capitol Hill. They advocate against more stringent payment limitations, but not necessarily because most of their members feel that way. Only a fraction of the National Corn Growers Association‘s members, who are mostly family farmers, farm enough land to be affected by stricter limits. But those that would be also happen to be the most active within the group, Owens said. And agricultural groups are loathe to call attention to subsidies in any form: “There’s a sense that no one wants to rock the boat against the other commodity groups because they may be next,” said Brian Riedl, senior federal budget analyst at the Heritage Foundation, a conservative group.

Subsidies Benefit Processors and Commodity Crop Growers

Sens. Byron Dorgan (D-N.D.) and Chuck Grassley (R-Iowa) have proposed an amendment to the farm bill that would strengthen payment limitations, capping payments at $250,000 and, more significantly, close the loopholes that allow the limit to be skirted. The amendment was defeated in 2002, the last time the farm bill came up for reauthorization, but it has been introduced again this year. Only a small fraction of farmers outside the South would be affected by the amendment–fewer than 500 farmers in Nebraska, for example–but they are vocal critics because “not a lot of banks will finance your land purchase if you can’t receive subsidies,” Owens said.

The subsidy program benefits only growers of “commodity crops,” which constitute only one-third of those filing farmers’ tax forms. Fruits and vegetables are considered “specialty crops,” although with sales totaling $49 billion annually, they comprise the bigger market share by $3 billion. “Nuts, trees, livestock—they don’t get any subsidies, so there’s that huge disparity,” said Michelle Perez, senior analyst for the Environmental Working Group, which tracks agricultural subsidies. This is troublesome for new farmers, many of whom are entering fast-growing sectors such as organic farming and non-traditional crops.

The concept of a commodity crop hinges upon the facts that they are relatively uniform, and thus easy to trade internationally, and that they can be stored for years until they can be sold for the best price. But their defining characteristic is that they are input crops, used to produce other goods like animal feed (and, indirectly, beef and poultry), ethanol and fabric.

Subsidies keep commodity prices lower than the cost of producing them, meaning that although the farmers may be the ones receiving the paycheck, “the ones who run that cheap, cheap grain are the ones who really benefit. They move it around the world and sell it at a great, great profit,” said Adam Warthesen of the Land Stewardship Project, a sustainable-agriculture group. That includes meat and poultry producers, such as Tyson and Cargill, and corn processors, such as Archer Daniels Midland (ADM). Tyson spent $1.4 million lobbying in 2006, and meat producers’ trade groups spent an additional $1.7 million. ADM ranks 85th on the Center for Responsive Politics’ list of all-time top donors.

Agriculture subsidies also pressure farmers to grow more and provide large farmers with the liquidity to buy out their smaller neighbors, promoting consolidations. They have the effect of raising land prices dramatically, posing an obstacle to those who want to enter the profession. They threaten small, diversified farms because those family-operated enterprises, which may grow several crops and raise livestock, don’t receive subsidies on the homegrown corn they feed their animals, while large cattle producers are able to buy corn from subsidized growers at lower prices.

As for the bigger farmers? “What they’re finding out is when there’s low prices, they’ve got to run more land and try to take on more acreage,” Wortheson said. “They’re doing well with the commodity title, but I’m sure they’d take a better price over government subsidies any day.”

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